Posts Tagged ‘GM Chapter 11’

Storm clouds over Detroit. At the depth of the recession, two of the three US makers went bankrupt.

The economy was collapsing more rapidly than during the Great Depression, and nowhere was that more apparent than in Detroit, where the Big Three automakers faced the very real prospect of going out of business – destroying a million or more jobs in the process.

Ford Motor Co. was able to survive by mortgaging everything; not only its factories, but even its Blue Oval logo. General Motors and Chrysler didn’t move fast enough to secure equity lines. They had to be salvaged with the help of the largest federally funded bailout in history. It broke precedent and, many would argue, broke the law. The rescue effort may also have saved the economy, according to its proponents.

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Was it good or bad? “It was something in-between,” contends Bill Burke, suggests Bill Burke. He’s a media industry veteran and co-producer of the new documentary, “Live Another Day,” which has received strong praise on the film festival circuit and which will open at theaters nationwide on September 16th.

General Motors has posted $4.7 billion in earnings for 2010, its first annual profit since 2004, and another indication, the maker said, of its ongoing recovery after emerging from bankruptcy nearly two years ago.

A rebound in the North American market helped fuel the earnings, though GM’s numbers also received a significant boost from China where it is now the largest manufacturer in the booming market. Concessions from union workers played a significant role in improving the bottom line, with analysts saying GM now has a significant cost advantage over foreign-owned transplant assembly lines.

For the fourth quarter, GM reported net income of $510 million – after taking $400 million in charges for buying preferred stock held by the U.S. Treasury and other one-time expenses – which worked out to $0.31 a share. Factoring out the one-time charges, GM would have earned $0.51 a share, slightly above the consensus on Wall Street.

For the full year, GM earned $2.89 a share on revenues of $135.6 billion. During the fourth quarter, revenues reached $36.9 billion, which was also ahead of the $34.3 billion estimated by analysts tallied by FactSheet.

GM ran up more than $80 billion in losses, starting in 2005 and continuing through to its 2009 bankruptcy – from which it emerged only after receiving about $50 billion in federal assistance. It has since paid off all its outstanding U.S. and Canadian government loans and last November’s initial public stock offering resulted in the sell-off of slightly less than half the federal stake in the automaker.

General Motors is ready to close up shop and disappear for good. The “old” General Motors Corp., that is, the one that went into Chapter 11 last year.

Formally known as Motors Liquidation Co., it’s all that’s left of the bankrupt side of the business, abandoned plants and other assets that were to be used to help cover the billions of dollars in liabilities that the new GM shed as part of its court-ordered reorganization.

Al Koch, the reorganization specialist who has been serving as CEO of Motors Liquidation, hopes to get court approval for a final plan that would divide those remaining assets into four individual trusts. Approval could come by early 2011, though probably not in time for the “new” GM’s upcoming IPO, according to company sources.

Numerous creditors initially tried to block or revise the GM bankruptcy filing, last year, but their demands ultimately were sidelined by the Obama Administration, which came up with roughly $50 billion in federal assistance to keep the automaker alive. In all, Motors Liquidation has received over 70,000 claims worth more than $275 billion. Old GM managers say they have since resolved or rejected about $150 billion of those.

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Among those who now have a stake in new GM are bondholders, who themselves lost $27 billion as part of the bankruptcy. But they were given a 10% stake in the new company and warrants to purchase another 15%.

Former GM chairman G. Richard Wagoner has avoided the spotlight since he was fired by President Barack Obama’s automotive task force, but now appears ready to launch a second career, serving as a director on various corporate and educational boards.

His newest appointment lets Wagoner put at least one foot back into the auto industry. Aleris International, Inc. says the 57-year-old Wagoner has been elected to its Board of Directors and to the Board of Directors of Aleris Holding Company, its parent. In turn, Aleris Holding Company is majority owned by Oaktree Capital Management, a private equity firm.

“We are extremely pleased to welcome Rick to the Aleris board,” said Steven J. Demetriou, Aleris chairman and chief executive officer. “He brings a wealth of expertise that will be invaluable to Aleris as we continue to strengthen our company and grow.”

A former college basketball star, the former GM chairman also serves his alma mater as vice chair of the Board of Trustees of Duke University and a member of the Board of Dean’s Advisors of the Harvard Business School, Duke’s Fuqua School of Business Advisory Board and the Detroit Country Day School Board.

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And despite his occasional tiffs with the media, Qagoner also was recently elected director of The troubled Washington Post Company and sits on the Mayor of Shanghai’s International Business Leaders Advisory Council.

No more over-promising and under-delivering at GM, insists CFO Chris Liddell.

General Motors reports it lost $4.3 billion during the nearly six months after it emerged from bankruptcy on June 10, last year, but senior GM officials stressed that during the final quarter of 2009, the company’s finances improved substantially, making it very possible the long-troubled automaker will be back in the black for 2010. ( See GM Has a Chance of being Profitable by Ken Zino)

Using what it described as “fresh start accounting,” GM’s Chief Financial Officer Chris Liddell laid out a cautiously optimistic snapshot of the automaker which, he said, is “building a foundation for this company to return to public ownership.”

But Liddell stressed that there are numerous uncertainties in the way and that prevents GM from setting a specific timetable for both a financial turnaround and for the planned Initial Public Offering that will help raise cash needed to repay the U.S. Treasury for last year’s $52 billion bailout.

In a conference call with reporters and analysts, Liddell and newly appointed Chief Accounting Officer Nick Cyprus stressed that the post-bankruptcy GM is a very different company from the one that went into Chapter 11, last year. Among other things, it has slashed its debt and liabilities by tens of billions of dollars, ending 2009 with face value debt of less than $8 billion, excluding government money that now gives the U.S. government a 61% stake in the automaker. ( See GM Delays Annual Report Filing by Ken Zino)

Why is this man smiling? Perhaps it helps that GM CEO Ed Whitacre plans to pay down another $1 billion in government loans.

With a goal of paying off its entire debt to the U.S. Treasury this year, General Motors has anounced it will write another $1 billion check to Uncle Sam by April 1 – and that’s no joke. The maker also plans to send a $192 million debt repayment to Ottawa.

That would leave another $4.7 billion to be repaid to Washington for the bailout the maker received, last year, to keep it in business; GM has already repaid $1 billion. And its goal is to be able to tear up the loan papers by June.

“GM has every confidence that the remainder of the loans will be paid in full by June 2010; five years ahead of schedule,” CEO Ed Whitacre said in a statement from the automaker.

For those trying to do the math, GM got $6.7 billion in federal loans during a financial crisis that ultimately led to its declaration of bankruptcy. But the “new” General Motors also received billions more that was invested in the form of equity, the federal government now owning a full 61% of the reborn automaker.

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The Canadians tossed some of their own money into the hat and received a smaller equity stake, as well.

It’s clear that Whitacre and his team would like to say farewell to the government as soon as possible. Though the CEO insists Washington has been a mostly hands-off investor, it has stuck its nose into the automaker’s Renaissance Center headquarters on more than a few occasions.

Ed Whitacre, Jr., could formally assume the chairman's post at the "new" GM as early as this coming Friday, July 10th.

A “new” General Motors seems likely to emerge from the ashes of bankruptcy by the end of the week, now that a federal bankruptcy judge has given the automaker the go-ahead for a so-called “363 Sale.” The order approving the sale came with an automatic 4-day stay, which would give time for appeals to be filed.

The sale process allows the automaker to transfer its good assets to an all-new company. That includes dozens of assembly and parts plants that will turn out product for the four remaining North American brands. The bad assets, including dozens of plants now closed or slated for closure, will be kept as part of the old GM, which will eventually settle claims against the company for pennies on the dollar.

The new GM will be markedly smaller than the company that existed prior to bankruptcy. Its North American workforce, once numbering close to 1 million, will fall to around 64,000, although the low number does not take into account GM workers previously transferred to Delphi, which is also in bankruptcy. Of eight North American marques, half will survive: Chevrolet, Cadillac, Buick and GMC. GM’s market share hit 20.3% in June. And the new GM Company wants to hold share to at least 18.5%, the break-even point at the current market volume of under 10 million units annually, once its downsizing has been completed.

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“This has been an especially challenging period, and we’ve had to make very difficult decisions to address some of the issues that have plagued our business for decades,” said General Motors CEO Fritz Henderson in a statement released today. “Now it’s our responsibility to fix this business and place the company on a clear path to success without delay.”

Can the king's horses - the White House Auto Task Force - and it's men, including new Chairman Ed Whitacre, ever put GM's Humpty Dumpty back together again?

…and all the king’s horses, and all the king’s men, couldn’t put Humpty Dumpty back together again.

Was Humpty Dumpty a cannon used in the siege of Colchester, in 1648, the hunchbacked King Richard III, or Prince Humperdink of Romania? Exactly how that nursery rhyme came to be, and who it refers to, is one of life’s little mysteries. But in modern times, you might better apply the name to General Motors, which was forced to declare Chapter 11 bankruptcy in the hopes of putting things back together again.

This Humpty Dumpty’s fall was an agonizingly slow one. When I first started covering the auto industry, back in the late 1970s, GM still controlled nearly half the U.S. market – it held roughly the same market share, in fact, as the Big Three collectively do today. But each year, point by point, GM began to teeter and totter. To many, it was just a question of timing as to when this corporate egg would lay splattered on the pavement.

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Barring some unexpected setback, the 101-year-old company won’t wind up as an omelet. In two days of hearings, earlier this week, GM and government officials repeatedly stated their goal of pulling off a so-called “363 Sale,” a move that would effectively ditch the old company’s debt and unwanted baggage, creating a leaner, more efficient “new GM.”

Could GM clear the hurdles and emerge from bankruptcy as early as July 10?

General Motors officials are back in court this morning, and what they have to say could determine the future of the bankrupt automaker.

Just a month after the 101-year-old company entered Chapter 11 protection, it is on track for a swift re-emergence as a “new” GM, possibly as soon as July 10th. But before that can happen, the automaker needs to get court approval to shed debt and bad assets, selling its “good” assets to an all-new entity that will have the federal government, a union health care fund, and two Canadian government bodies as its dominant shareholders.

The first critical step in a so-called “363 Sale” began on Tuesday with a hearing in federal bankruptcy court, in New York City. The hearing is continuing today, and despite the strong support of the Obama White House, there will be plenty of objections raised to the plan GM has laid out – a proposal that would, among other things, leave thousands of dealers losing their franchises, and bondholders swallowing billions in debt.

General Motors Corp. and the Obama administration Auto Task Force have agreed that the new GM will cover all product liability and lemon law claims after it emerges from behind protection of an expedited bankruptcy.

The decision to accept the product claims, which was filed over the weekend with the federal bankruptcy court, represents a departure from the Chrysler bankruptcy but also removes one of the most contentious objections to GM’s sales of assets designed to release GM from Chapter 11.

Nevertheless, the bankruptcy court has still received 750 written objections to the plan to sell the automaker’s best assets to the new company, which would be financed by billions in government loans. GM responded the objections in an “omnibus” answer that dealt not only with the product liability issue but objections by salaried retirees and unsecured creditors.

GM’s lawyer’s dismissed the claims of the unsecured creditors by citing a long list of cases, including the Chrysler bankruptcy, which went all the way to the U.S. Supreme Court before being decided in the smaller maker’s favor. GM’s brief also dismissed claims that the union VEBA had gotten a better deal than creditors.